The Education Department on Wednesday began emailing millions of student loan borrowers to let them opt out of President Biden’s new policy to reduce or eliminate their balances, advancing an alternative plan to the program struck down by the Supreme Court last year.
Biden’s debt relief policies are sure to take center stage as the election nears, despite the president’s departure from the campaign. Vice President Kamala Harris, the likely Democratic nominee, has heralded the administration’s efforts to clear the ledgers for millions of borrowers and said she would continue the policies if elected. While that position will curry favor with liberals who praise Biden for canceling more than $168 billion in student debt, it could further fuel political opposition from conservatives who consider the policies fiscally irresponsible.
Although the newest loan forgiveness plan will be finalized in the fall, the Biden administration is getting a jump on the process by informing borrowers that they have until Aug. 30 to call their loan servicer to bow out. Those who are interested in receiving relief need not take any action. Those who opt-out will not be able to opt back in, according to the Education Department. Borrowers are only eligible for the proposed relief if they have entered repayment after the proposed rules are finalized.
Get Breaking News Alerts Stay up-to-date with important news developments, delivered right to your inbox. Enter Email“By providing more information to borrowers on how they can take advantage of our upcoming debt relief programs, borrowers will be prepared to benefit swiftly once the rules are final,” Biden said in a statement Wednesday. “Despite attempts led by Republican elected officials to block our efforts, we won’t stop fighting to provide relief to student loan borrowers, fix the broken student loan system, and help borrowers get out from under the burden of student debt.”
Since the Supreme Court blocked Biden’s plan to forgive up to $20,000 in federal student loans per borrower in 2023, the Education Department has worked through a negotiated rulemaking process to create a regulation that achieves large-scale debt cancellation, albeit with a much more targeted approach than the last plan. The proposed plan is designed to reach people who are shut out of existing programs and those who have been trapped in unaffordable debt because of the byzantine student loan system, according to the department.
The proposed plan provides partial or full debt relief to borrowers in four circumstances: those who owe far more than they originally borrowed because of interest; those who have been paying for at least 20 or 25 years; those who attended career training programs that led to high debt loads or low earnings; and those who are eligible for existing forgiveness programs but never applied.
A key feature is the planned elimination of up to $20,000 in accrued interest for borrowers, regardless of their income. Single borrowers earning less than $120,000 or married couples earning less than $240,000 could qualify to have all of their accrued interest forgiven if they are enrolled in an income-driven repayment plan. The White House estimates more than 25 million people could benefit from that component alone. It will take effect this fall when the proposal is finalized, while other features will debut next year.
The new plan relies on the authority of the Higher Education Act — a different law than the one the administration cited in its failed 2022 plan — which experts say could give it firmer legal ground. But much like the last plan, Biden’s latest bid for sweeping debt relief could face legal challenges from conservatives.
“This is just another illegal scheme intended to buy votes in November, and it will do nothing to address the student loan disaster that Biden-Harris has exacerbated,” said Representative Virginia Foxx, the North Carolina Republican who chairs the House Education Committee. “Overpromising and underdelivering is an undeniable hallmark of this administration.”
